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MND NewsWire features plain and simple interpretations of industry related data and events written in a manner that maintains the interest of random readers while still catering to the perspective of a housing market professional.

By mid-morning the stock market was bucking up strongly behind the news of the
stunning sale of Bear Stearns at $2 a share. However, there was still bad news
out there.

PMI Group, one of the largest private mortgage insurance companies,
reported a record loss of $1.01 billion or $12.51 a share for the fourth quarter
of 2007 compared with net income of $100.5 million or $1.19 a share in the fourth
quarter of 2006. According to Reuters, analysts had been anticipating a loss
of $3.37 per share.

The company also announced it would slash its dividend 76 percent to $1.25
per share.

The losses were tied both to the growing rate of foreclosures which cost PMI
negative income of $236 million in its U.S. mortgage insurance operations and
$776.1 million in after-taxes losses due to the company's stake in Financial
Guaranty Insurance Company (FGIC).

Net premiums rose 12 percent to $263.5 million which reflected an increase in
new insurance written in the U.S. along with other factors.

PMI holds a 42 percent state in FGIC, the fourth largest bond insurer
which has a profitable business segment insuring municipal bonds but has a very
troubled subprime credit-default-swap business for which it has been trying
to raise $1 billion in capital to cushion against losses on these complex securities
that have lost significant value.

PMI's core business is private mortgage insurance in which it covers potential
lender losses on loans where borrowers put down less than a 20 percent down
payment. This sector of the mortgage industry is being hard hit as it pays claims
for bank losses through foreclosure. PMI said it expects to pay mortgage insurance
claims for its U.S. operations in an amount between $825 million to $975 million
this year.

Mortgage insurers such as PMI cover potential lender losses on loans to borrowers
who can't come up with a 20% down payment. The PMI companies have seen claims
skyrocket over the last year as the lack of liquidity in the housing market
makes it difficult for borrowers to refinance or for lenders to resell foreclosed
properties at profitable prices, forcing mortgage insurers to pay up.

In other mortgage news, Option One Mortgage Corporation, a
division of H&R Block, has been sold to Wilbur Ross for an estimated $1
billion.

Ross is known as a distressed asset investor who has, in recent months, agreed
to acquire $42 billion in mortgage servicing rights from American Home Mortgage
Investment Corporation and made a $1 billion investment in Bermuda bond insurer
Assured Guaranty.

Option One, the fourth largest mortgage servicer in the nation, services about
$53 billion of subprime mortgages. These assets, combined with the American
Home Mortgage Investment acquisition will give Ross the second largest subprime
servicing portfolio in the nation after Countrywide Financial.

Option One was among the first of the subprime participants to admit problems
with its portfolio and ultimately generated million of dollars in losses. At
the time its troubles became public it had agreed to be acquired by Cerberus
Capital Management but both sides agreed to terminate their deal as conditions
continued to deteriorate. H&R Block had announced in December that it was
shutting down Option One.

The Option One/Ross deal is expected to close by May 30 and the sales proceeds
will primarily be used to pay off some $700 million in Option One debt.

Comments

What is going on with the seconds that were originated with Sub Prime and then sold off seperately from the first loan and the banks that currently own these seconds? There hasn't been much discussion or analysis on how this will effect the markets in the short and long-term.

Maria

on

Good for Option One. They are very unprofessional and employees are very greedy. They lost the flexibility to adapt to the mortgage changes and just stuck to the book not able to help save homeowners from foreclosures thus now ending with a very high inventory of losses. Maybe this will serve as a lesson to other lenders who refuse to resturcture their policies and help homeowners to avoid this same kind of story. I'm happy Option One is gone for good.

anonymous

on

Wasn't Option One sold to Select Portfolio Servicing? Is SPS a reliable mortgage servicing company? Are there any repercussions to the homeowner whose fixed rate Option One mortgage was sold to SPS? Is the homeowner vulnerable because of this sell off? Should the homeowner refinance with a more reputable company, even if the interest rate one point higher than their current interest rate?

Deborah

on

So far my experience with AMHSI is very negative. Seems their customer service is in India and the people on the phones are extremely pushy.

Leslie

on

They want you to believe Option One became some new company. After I received my statement from American Home Mortgage Inc. today there was errors on it JUST like there always was on my Option One always had. So I went to the website address they had on the statement. Since I had never been to this website before I automatically went to register as a new user. Only to find that I was already registered. Ends up it is the EXACT SAME website, just a different address and name on it. So when I went to my account and then the secure message center I found messages that I had sent to Option One and their responses (the two they did actually answer) were still there. Everything on this website is exactlly the same as Option One's. So how is it this "NEW" company has all of this on their "NEW" website? Because nothing is new about it. It is the same company under a different name. This company and group of people need to be stopped. Ruining peoples lives should not be a business.

What happens to the Foreclosures that were filed by Wells Fargo as Trustee for Option One Mortgage back in January of 2008? Can American Home Mortgage pick up and follow through with the Foreclosure? or are they through too? Since as I read it, Wilbur Ross purchased Option One's mortgages wouldn't that mean that his company would have to re-file Foreclosure proceedings or allow homeowners to file for the HAMP programs to save their homes. If a Foreclosure was allowed in the year 2011 under Wells Fargo as Trustee filed back in 2008 taken over by American Home mortgage, shouldn't it be set aside or dismissed due to improper filing? No defense was allowed by the Judge as stated by the Judge, "THE BANKS HAVE TO BE PAID" Do I have a loop hole here to have this Foreclosure set aside?

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